Category Archive: ‘Foreclosures/REOs’

The foreclosure rate of loans originated over the last few years has been LOW!

If the strict underwriting continues, we will only see an occasional foreclosure from now on. We’ll be telling our grandkids about how back in the day there was this guy who ran a video-cam through hundreds of them!

A certain foreclosure-subscription company is always rattling their sabre about any uptick in notices. The headline for this article is: Early Stage Foreclosure Filings up Nationwide and in Most States:

But with the banks engrossed with loan-modding anyone who can fog a mirror, the only thing that matters is how many actual foreclosures are being completed. Buried deep in the article:

The dip in total filings was due to a 10 percent reduction in bank repossessions or completed foreclosures compared to October. A total of 25,249 properties were taken into bank inventories or REO, down 17 percent from November 2013.

It was the 24th consecutive month in which completed foreclosures were lower on a year-over-year basis.

The national count of completed foreclosures has been dropping for two years straight! Bill showed how delinquencies have been tapering off too:

Regardless of how it happened, it looks like a soft landing that will last – at least as long as rates are ultra-low.

REO listings have increased lately around NSDCC, though they are still a small fraction of the overall marketplace (there have been 2,238 detached-home sales closed this year between Carlsbad and La Jolla).

The short-sale listings coming to market haven’t changed much all year, which would be the first place you would see the effect of mortgage servicers getting tougher with deadbeats:

Type of Listing

Jan 1 – June 30

July 1 – present

REO

4

8

Short-sale

36

18

Non-Distressed

2,672

1,262

Total

2,712

1,388

This guy borrowed $3.75 million to do a spectacular remodel on this Del Mar home (the house with the glass-bottom pool), but he wasn’t going to give it away. The original list price was $6,750,000 in October, 2013, and dropped to $5,950,000 before getting foreclosed in June. The bank promptly listed for $5,495,000, and sold it for $5,210,000 last month:

There is some hope that lenders and servicers are increasing the flow now that prices are so much higher than before, and it would make sense that they would cherry-pick the properties on which they could make a profit.

Reader elbarcosr noted that the latest default list was the longest in recent memory, and wondered if the foreclosure market might be coming back to life.

Let’s hope so!

If the NAR would have been looking out for realtors, they would have insisted that the foreclosure process be allowed to run its course, and clear the market. Instead, they lobbied for foreclosure-rescue programs from the government, and now we have a mushy unknown distressed market – again.

Auction.com is one of the culprits, and we just don’t know what to expect from them, other than mis-direction. Back in June, we saw them try to auction a tenant-occupied home that Chase has owned since 2011:

It never closed escrow, and has never been on the MLS – instead, it’s another bank-owned property sent to foreclosure purgatory.

Auction.com is also known for conducting price discovery for NationStar on their short sales. Auction.com will market the home and conduct online bidding even though the seller has a written contract with a buyer. Nationstar has a right to sell their short sales for top dollar, and this process helps to expose any shady dealings by the listing agent, but it doesn’t help the reputation of Auction.com.

Though auction.com is the most visible player in the foreclosure market, we can’t judge the trend by their advertising. What matters most is whether the lenders and servicers are going to liquidate any remaining defaulted properties, especially now that prices are up?

Has Nationstar or other servicers been ramping up production in light of the higher prices? Not really – here are the notices issued over the last 12 months in San Diego County:

The foreclosure market has been rife with speculation and intrigue, but we always seem to end up with a nothing-burger. But I’m giving it another chance – I signed up to be a Zillow foreclosure specialist, figuring it can only get better from here.

His research? Because the Case-Shiller Index is still rising, just not as fast – that means prices will be heading lower? There are plenty of reasons you could use to justify the doomer position (wars, unemployment, unaffordability, earthquakes, etc.), but smaller increases are a weak excuse.

He also thinks we will still have a surge of foreclosed properties to come, just because their are so many people delinquent. But once you miss a few payments and ruin your credit, the delinquent homeowners might as well ride it out until they get the boot.

How are the San Diego foreclosures?

Some said they dropped off because of the Homeowners Bill of Rights, which was released two years ago and became law on January 1, 2013. The bansk have had plenty of time to adjust – here’s how they are doing:

It’s hard to believe that people just go back to making their payments, whether they get a loan mod or not. The banks will wait until they can make money by foreclosing, which around the coastal markets, should be after another 10% appreciation or so. Until then, why foreclose and lose money?

The decline in foreclosures continues, but the pundits and media don’t really look into it much further. Here is the best quote they could come up with in this article, linked below (hat tip to Stormin’):

“We have now registered two and a half years of continuous decreases in the number of homeowners who are in some stage of the foreclosure process. This consistent decline means fewer Americans are experiencing the distress of delinquency and default,” said Anand Nallathambi, president and CEO of CoreLogic.

The foreclosure notices and the number of properties actually foreclosed have dropped considerably in San Diego County.

We have had 1,500 to 2,207 notices sent out per quarter over the last 12 months, but only 450-610 properties foreclosed per quarter. The big gap makes you think that the banks/servicers are still throwing loan mods at anyone who wants one, and cancelling any notices soon thereafter.

“The relatively high percentage of foreclosures with equity is surprising to many because it would seem homeowners with equity could easily avoid foreclosure by leveraging that equity by refinancing or with an equity sale of the home,” Blomquist noted.

No surprise here.

With no pressure from anyone to foreclose on non-payers, mortgage servicers can be picky about who gets foreclosed. It makes sense to foreclose where you can make a profit, and let the still-underwater folks ride the gravy train for another year or two.

The hedgies got fired up this week over RealtyTrac’s report of California foreclosures rising 57% last month – the post is featured at the top of their front page, and has great comments: www.zerohedge.com.

At first glance, it would support my theory that banks deliberately turned off the foreclosure machine, and have merely started it up again:

But the CA Homeowners’ Bill of Rights had just been implemented in January, 2013, causing a drop in notices issued while servicers made adjustments. Last month’s number of California foreclosure notices is similar to every month since January 2013.

For locals, here are the San Diego County notices:

It’s likely that the banks/servicers have thrown every defaulter into some sort of loan modification – or if they didn’t fit, just let them lie. With a casual handling of defaulters, expect that borrowers will drift in and out of the foreclosure process as they enjoy a pay-if-you-feel-like-it policy.

Expect the foreclosure-notice data to be jumbled from now on, and not indictative of much really. What counts is the number of people actually getting foreclosed – here are the San Diego results of trustee sales for the last three years:

The number of properties actually foreclosed has dropped off the table in the last 12 months – in 4Q13 we averaged 150 foreclosed homes per month in a county of 3 million people. We will survive that – heck, in the previous fourth quarter (4Q12) we had triple the number of foreclosed properties, and the market took off in a frenzy!

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